Is GameStop in denial? Digital Downloads Not Relevant Until 2014?
Matt Peckham reports on PCWorld that GameStop is playing with numbers
as it tries to play down the relevance of downloadable games.
It cites the IndustryGamers reports which says that ‘GameStop doesn't expect digital distribution to be a threat to stucco-and-rebar-retail until 2014.’
GameStop "has been monitoring and studying the capabilities of digital downloading and its potential adoption over the last several years" and that the company recently "conducted the most thorough study to-date on its capability."
Matt takes a pretty hard look at the figures.
GameStop believe that an "addressable market" for digital downloads won't exist for another five years; only 25% of the population will have access to the technology necessary to download full games.
As I write, I have Second Life on my 4 year-old laptop and have streaming music coming down the wires.
Why the 5 years?
Costs are another issue.
It reckons ‘service costs ($100/month), storage limitations, and consumer price intolerance will offset digital's chances of supplanting retail anytime soon.’
According to the study, consumers will pay up to $39 per downloadable game, an expectation GameStop thinks will act as a ‘disincentive for publishers facing escalating production costs’.
This is rubbish.
I have high speed broadband for less than 10 USD per month, almost unlimited storage with Gmail and my web hosting ($5 per month) give me GBs of space/traffic.
Math points out that ‘download portals don't charge a usage or monthly/annual membership fee, and as the broadband market grows, competitive pressure should keep even the fastest consumer services from moving up much past $50 a month, while legal obstacles should prevent companies from enforcing usage caps or engaging in traffic shaping or bandwidth throttling.’
Sterne Agee analyst Arvind Bhatia, who wrote the report, notes that GameStop's “Management.... feels that digital growth and brick and mortar growth can co-exist,” said Bhatia. “Through their brick and mortar locations, the company can help facilitate and capitalize off digital. Overall, management did not seem at all concerned about the near-term threat but instead is looking at ways to potentially profit from digital.”
Read that line again - management did not seem at all concerned about the near-term threat.
James Brightman, over on IndustryGamers, thinks that GameStop will be hurt by the digital revolution in the games industry, as video games move away from the boxed product model and towards the games as a service model.
He warns that ‘If GameStop doesn't want to see its stock tank, the company will have to start thinking about how to transform its business for the near future.’
Here's the bottom line.
Matt again – ‘In a thriving digital distribution market, GameStop loses. They're late to the game, and not doing much to distinguish themselves from their more evolved and intrepid competition.’
Their revenue model depends on dominating the high street. On the web, they’ve missed the boat and are flapping around trying to avoid the inevitable.
Update: a post on IndustryGamers make the point that ‘a download-only game (XBLA Magic the Gathering) was in the top 5 most played X360 games this week… points to the fact that the Age of Download is coming faster than many may expect or desire.
It cites the IndustryGamers reports which says that ‘GameStop doesn't expect digital distribution to be a threat to stucco-and-rebar-retail until 2014.’
GameStop "has been monitoring and studying the capabilities of digital downloading and its potential adoption over the last several years" and that the company recently "conducted the most thorough study to-date on its capability."
Matt takes a pretty hard look at the figures.
GameStop believe that an "addressable market" for digital downloads won't exist for another five years; only 25% of the population will have access to the technology necessary to download full games.
As I write, I have Second Life on my 4 year-old laptop and have streaming music coming down the wires.
Why the 5 years?
Costs are another issue.
It reckons ‘service costs ($100/month), storage limitations, and consumer price intolerance will offset digital's chances of supplanting retail anytime soon.’
According to the study, consumers will pay up to $39 per downloadable game, an expectation GameStop thinks will act as a ‘disincentive for publishers facing escalating production costs’.
This is rubbish.
I have high speed broadband for less than 10 USD per month, almost unlimited storage with Gmail and my web hosting ($5 per month) give me GBs of space/traffic.
Math points out that ‘download portals don't charge a usage or monthly/annual membership fee, and as the broadband market grows, competitive pressure should keep even the fastest consumer services from moving up much past $50 a month, while legal obstacles should prevent companies from enforcing usage caps or engaging in traffic shaping or bandwidth throttling.’
Sterne Agee analyst Arvind Bhatia, who wrote the report, notes that GameStop's “Management.... feels that digital growth and brick and mortar growth can co-exist,” said Bhatia. “Through their brick and mortar locations, the company can help facilitate and capitalize off digital. Overall, management did not seem at all concerned about the near-term threat but instead is looking at ways to potentially profit from digital.”
Read that line again - management did not seem at all concerned about the near-term threat.
James Brightman, over on IndustryGamers, thinks that GameStop will be hurt by the digital revolution in the games industry, as video games move away from the boxed product model and towards the games as a service model.
He warns that ‘If GameStop doesn't want to see its stock tank, the company will have to start thinking about how to transform its business for the near future.’
Here's the bottom line.
Matt again – ‘In a thriving digital distribution market, GameStop loses. They're late to the game, and not doing much to distinguish themselves from their more evolved and intrepid competition.’
Their revenue model depends on dominating the high street. On the web, they’ve missed the boat and are flapping around trying to avoid the inevitable.
Update: a post on IndustryGamers make the point that ‘a download-only game (XBLA Magic the Gathering) was in the top 5 most played X360 games this week… points to the fact that the Age of Download is coming faster than many may expect or desire.
